Recently at People Liberation Army’s rally, Chinese President Xi Jinping has asked China to go to Marxist roots. Many foreigners used to think that Mao’s China was Marxist and since Deng Xiaoping China is capitalist. But this is not how the Communist Party of China think. For CPC, Mao and Deng both enriched Chinese Socialism in different objective conditions. Since objective conditions change dramatically in the 1970s, Deng took a path that is distinct from Mao.
But Deng never negated Marxism. We will explain here how CPC’s vision changed in different historical periods and why Xi Jinping facing new objective conditions distinct from Deng is taking a distinct path. Mao, Deng and Xi actually represent the response of Chinese leadership to different material conditions. Communists around the globe must accept this success of the Chinese Communist Party and must unite to become a formidable force in global politics.
During the first decade of 20th-century colonial industrial capitalism was facing a deep crisis. Automation was resulting in fewer job opportunities. Heavy centralization of production to exploit economies of scale resulted in big cartels and companies outcompeting smaller companies. Newer industrialized countries were rising and challenging older industrialized countries.
Thus there was working-class movement, a crisis among small owners and industrialized countries at war with each other over control of raw materials, cheap labour and colonies. Thus World War 1 broke out and Lenin seized the opportunity of the then social and political disarray and created the Soviet Union by seizing state power under advanced working class. Lenin asked for the complete annihilation of feudalism and pointed out the ill effects of a profit-motivated production process and hence following Marx-Engels idea called for state ownership of means of production (i.e. land, machinery and factories) and resource allocation by Planning Authority rather than the market.
The labour market was curbed by granting the right to employment for all. Under Stalin, the Soviet Union succeeded in doing them. Planned resource allocation under state ownership helped the Soviet Union to succeed in heavy industries and creating an independent weapon producing industries. The Soviet Union also succeeded greatly in improving education and health. The victory of the Soviet Union over Nazi Germany made the Soviet Union a role model for the then world.
China and many East European countries had a communist revolution just like the Soviet Union. CPC under the leadership of Mao went for the abolition of feudalism and planned economy. But after watching revisionism in the Soviet Union, Mao understood just ensuring state ownership, planned allocation of resources and right to employment was not enough to move towards communism. Mao criticized Stalin’s view that socialism is a distinct system from capitalism with its own social values and economic laws.
Instead, Mao defined socialism as a stage between capitalism and communism with both characteristics of capitalism and communism. Since the struggle between capitalism and communism was then in just second-century socialism is expected to have more capitalist features and less communist ones. Mao understood only after many cultural revolutions, new communist social values and economic laws can emerge and more that many centuries of struggles are needed.
By 1970s West underwent tremendous change and started to use debt to create demand and started negating the role of the state. State’s involvement often said to be inefficient and end up as a disincentive to work hard. Based on petrodollar credit channel, USA assured itself of unlimited external credit and with this inflated its asset prices and then made a profit by trading in assets. Thus, capitalists could find profit in asset trading and overproduction crisis was temporarily solved. Gradually Western countries especially the USA started exporting its manufacturing base to Third World countries for making more profit by using the latter’s cheap labour while them-selves started to make a profit by asset trading. Deng understood the opportunity of getting Western technology, capital and market to industrialize China quickly.
Deng took the opportunity. Many people across the globe thought that Deng was moving towards capitalism. They failed to get that Deng is reacting to the changed material condition. Capitalism has transformed itself from monopoly production capitalism to monopoly financial capitalism. Debt to create demand has become more important than production to supply. Consumers became more important than labourers.
This simply assures the fact capitalism is transforming itself in reaction to the overproduction crisis. And this transformation presented China a historical opportunity clearly noted by Deng in his thesis. Deng also said that China with communist leadership and state enterprises’ leading role will be able to invest more in infrastructures and move to higher value chain than liberal democracies which are dominated by the private sector.
Deng also clearly understood that in the global supply chain, capital can move from a country of a higher wage to the country of lower wage and thus reducing working class bargaining power across the globe significantly. But once China will raise its per capita income to the levels of imperialist countries of the West, other Third World countries will start following China.
As wage rate difference will reduce between Third World and imperialist West, the bargaining power of the working class will rise again. Then the working class will become stronger than ever across the globe. Deng predicted China will narrow the gap with imperialist countries in terms of per capita income and wage rate by 2049. After 2049, most countries will start following the socialist mode of China and global working class will be stronger than ever before.
China began to industrialize itself using capital and technology from the USA, Europe and Japan while the USA continues to take debt from China and other countries and generate demand for Chinese made products. The process started in the 1980s but after the 2007-08 global financial crisis, this process came under severe doubts. China’s economy has grown to more than the USA’s in purchasing power parity. China’s economy becoming too big to rely on debt created demand of the US economy. The USA also found itself indebted to a lot of countries and as its asset trading business in crisis, people started to question the deindustrialization process that went side by side with the growth of asset trading in the USA. So the crisis is back in Western capitalism.
Xi Jinping came to lead China in this critical situation. He and his comrades understood that the old system of globalization cannot go on. Since the USA will no longer be able to generate enough demand for Chinese products and so the curse of overproduction is on the Chinese economy now. How to react then?
One way is following USA and West, China can start doling out debt to inflate asset prices and profit from asset trading and export its manufacturing base to some other less developed Third World countries like South-East Asia, India, Bangladesh or Africa. An important problem in following this step for China is that China does not have any petrodollar type credit channels and its impossible for China to make one. This is simply because the petrodollar reflects three centuries of Anglo Saxon global domination. China has neither a history of global domination nor it is interested in. So China can never have an unlimited inflow of real external debt, unlike the USA. Another shortcoming of this step is that China will then face similar problems of deindustrialization USA is facing today.
Hence under Xi’s leadership, China came up with a different idea to counter the overproduction crisis. China came up with the Belt Road initiative which is about investing in infrastructure like ports, railways, roads across the globe and help different poor regions to develop and share the prosperity of China. China has a huge trade surplus and it is still growing funding infrastructure worldwide will not be a problem. But long gestation period i.e. non-profitability for a long period of time is often considered to be a great problem for Belt Road Initiative. It may lead to the indebtedness of many countries to China. But will this be a real problem for China?
Remember Xi’s Speech: Marxist Root
China can go for Belt Road while Japan or Germany with a huge trade surplus cannot. This is because China can endure a long gestation period and long term losses while the Western system cannot. In the Chinese economy mode of surplus value appropriation just like the Western system is essentially capitalist in nature. That means capitalist appropriate surplus value created by wage labour by having ownership of machines and other means of production. But while in West how to use surplus value is decided by private capitalist and banker class, in China the same is decided by the leadership of the communist party.
Thus, the communist leadership may enforce investment with long gestation period which is highly avoided by private capitalist and banker class. Thus while the Western system is more prone to go for short term profit making but unproductive asset trading, China can go for productive but non-profitable investment with long gestation period. This also shows China will keep resource allocation power more hands of State than in hands of private capitalists. The recent crackdown on top executives of Aubang, Wanda, etc. clearly shows this. Most of Belt Road project to be developed by state-owned banks and infrastructural corporations.
Similarly, Western media trying to show Belt Road as a major cause of indebtedness of many Third World countries like Sri Lanka and Pakistan. But the point is Sri Lanka and Pakistan has just 12.5% and 10% of their total external debt owing to China. They are indebted mostly to Western financial institutions, not China. China also gave debt waiver to Gambia, Zimbabwe and Venezuela while the changed the decision of investment in Kenya and Malaysia according to the request of their respective governments. Many Third World countries still failed to annihilate feudalism and so their productive potential for industrial development cannot be released yet. So Belt Road Initiative may not be enough for developing these countries but definitely, it can act as a stimulant.
Recently during the trade war, the USA has repeatedly asked China to reduce the role of state-owned enterprises and give more level playing field to private sector citing the fact that the private sector is more profitable. China repeatedly replied that China has right to follow its own path of development and clarified that state-owned enterprises are less profit making because they are often given duty to generate demand by investing which helps the private sector to remain profitable. As Chinese reliance on export demand will fall, Chinese reliance of state enterprises to generate demand will rise.
We can thus conclude that China never actually moved away from Marxist approach but changed course as time and material conditions changed. Under Xi, state companies will do more infrastructural investments often incurring losses. By 2035, the Communist Party of China has assessed that China will outcompete the USA not only in production but also in finance and military. It is then that socialism will be popular across the globe again. Following China, as different Third World countries will narrow per capita income gap and wage rate gap with imperialist countries, the capital’s bargaining power will reduce and working class bargaining power will rise considerably. Then working class revolutions will spring across the globe again. Belt Road Initiative is one way to develop the Third World quickly.
Definitely issue of national self-determination and land reforms still remains not done in many Third World countries and this is destroying the productive potential of these countries. Just Belt Road Investment is not enough. Hence, now it is ideal time when global communists must unite under the leadership of Xi and Communist Party of China and start to raise all major issues which will help Belt Road to become a major success in developing Third World. Third World development will be followed by an increase in the power of the working class throughout the globe. Neoliberal globalization is already dying out and there is no strong political ideology strong enough to take the opportunity. Global communists must grasp the opportunity.
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